M/S. INDIA METERS LTD. versus STATE OF TAMIL NADU

Citation: [2010] 11 S.C.R. 22 · Decided: 07-09-2010 · Supreme Court of India · Bench: DALVEER BHANDARI · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2010) 11 S.C.R. 22 
MIS. INDIA METERS LTD. 
v. 
STATE OF TAMIL NADU 
(Civil Appeal Nos. 1032-1033 of 2003) 
SEPTEMBER 7, 2010 
(DALVEER BHANDARI AND DEEPAK VERMA, JJ.] 
Sales tax - Freight and insurance charges incurred by 
the dealer - Levy of Sales tax on -
Held: Freight and 
C insurance charges incurred by the dealer form part of the sale 
price - Therefore, ·the same would fall within scope of 'turnover' 
and sales tax is leviable on it - Tamil Nadu General Sales 
Tax Act, 1959 - ss. 2(n) and (r) - Tamil Nadu General Sales 
Tax Rules, 1959 - r. 6 (c) - Central Sales Tax Act, 1956. 
D 
Words and Phrases - 'Sale' and 'Turnover' - Meaning of, 
in the context of ss. 2(n} and (r) respectively of Tamil Nadu 
General Sales Tax Act, 1959. 
The appellant-assessee did not include the freight 
E charges in its taxable turnover. On inspection it was 
found that the assessee had collected freight charges 
and insurance charges separately under the debit notes, 
but the same had not been shown in the monthly returns. 
The Assessing authority assessed 50% of that amount, 
F as freight charges, and levied tax on that amount of the 
freig~t charged by the assessee forming part of the sale 
price. Assessee's appeal against the order succeeded. 
Further appeal by the Revenue was allowed by the Tamil 
Nadu Special Taxation Tribunal. The assessee filed a writ 
G petition against the order of the Special Tribunal. The High 
Court upheld the order of the Special Tribunal. Therefore, 
the instant appeals were filed. 
H 
Dismissing the appeals, the Court 
22 
INDIA METERS LTD. v. STATE OF TAMIL NADU 
23 
HELD: 1. The amount of freight and insurance 
A 
charges incurred by the dealer forms part of the sale 
price. In the instant case, there was specific contract 
entered into by and between the parties and according 
to the relevant clause of the contract, the ownership of 
the goods would remain with the supplier till they are 
B 
delivered at the destination station. Thus, the High Court 
was justified in affirming the judgment of the Special 
Tribunal. [Paras 41, 42 and 43) [37-E-G] 
-
2. In the instant case, the obligation to pay the freight C 
was clearly on the appellant as there wa~ no sale at all, 
unless the goods were delivered at the premises of the 
buyer and in order to so deliver, the assessee necessarily 
had to incur freight charges. [Para 14] [29-B] 
3. It is true that Rule 6(c) of the Tamil Nadu General 
Sales Tax Rules, 1959 permits deduction of the cost on 
freight while determining the taxable turnover. However, 
that provision must be read in the context of definition 
of "turnover" as also the definition of "sale" in Sections 
2(r) and 2(n) respectively of the Tamil Nadu General Sales 
Tax Act. The turnover of an assessee/dealer would 
include the aggregate amount for which goods are 
bought or sold. It is, therefore, the amount for which the 
goods are bought or sold, which form part of the 
turnover, and a thing can be said to be sold only when 
the transaction falls within the scope of the definition of 
"sale". When the transfer of the property or the goods is 
to be at the place of the buyer to which the seller is under 
D 
E 
F 
an obligation to transport the goods, these expenditures 
incurred by the seller on freight in order to carry the 
G 
goods from his place of manufacture to the place at which 
he is required under the contract to deliver, would thus 
become part of the amount for which the goods are sold 
by the seller to the buyer and would fall within the scope 
of "turnover". [Paras 18 and 20) [30-C-D; G-H; 31-A] 
H 
24 
SUPREMEtCOURP REPORTS· . .[2010]' 11- S:G.R. 
A 
"Dyer Meakin Brewerles,Ltd. v; State.of Kera/a (1970) 3 
SCC 253;Hindustan Sagar· Mills v: State .of, Rajasthan 1and 
Ors.1·(1978)14 SCC 271;Gement.~Marketing. Go ... of India.Ltd.· 
v.' Assistant• GommisEfioner• of 1Sales1<I Tm<,; Indore ·and 1 Ors.• 
(1'980)<.1 :sec 71 ;i Cement. Marketing.co.> of:Jndia 1,, ,Lfd .. v! 
B Comrrfissioner. of; commercial ffaxesr, Karnataka1.1980.1(~upp) 
scc::373; ~ TV/.ljRamco .cement rDistNbutioh co: (P)1Ltd.\ etc .. 
etc.· v.:: Stateiof.'fami/Naduietc. teto:i:(1993) 11SGC~192;tBihar 
State Electricity Board ahdlArif. vcrUsha Martin Industries and 
Anr. (1997) 5 SCC 289; Black Diamond Beverages and Anr. 
c v.' lcom'metcilll 'Tax .. 'oftiger, cJntrat 1Sectloh,As'sessment 
Winf}i?, ''Caicuffa' and ·ori}j (199$t1'~scc 45B~Comfnis$iciher 
oPcehtra't~lEJlcis'e, 8Da1H1 V. "'MarLfi/JuC!yog l.'.td.'1

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